Ben's Market Chat - Insights and Interviews

Ben's Market Insights #32

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend. Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg DESCRIPTOR - This week we focus on the macro outcomes of President Trump’s visit to China and the potential leadership challenge in the UK. We’ll also discuss the bounce back of software vs semiconductors and why this could be a false dawn. President Xi welcomed President Trump with pomp & ceremony to China. However, he also had Trump’s advisors and possibly 99% of the rest of us racing to our nearest Google Search engine to look up who Thucydides was and what was the trap he was referring to.  This was clever one-upmanship on Xi’s part, using an analogy from Greek ancient history to imply that a rising new nation will almost always clash militarily with the current incumbent empire through war. It was both a warning and a statement of intent on Xi’s part. Up and until 2022-23 when AI expenditure began to accelerate in the US, there was some truth to the waning of the US star in favour of a rejuvenated China using its belt & road initiative as a way to position itself as the new and rising economic behemoth. However, the US spend on AI and re-acceleration in its technological dominance has pushed back China’s ambition and is allowing the US a longer lifeline. Investors are hailing this extended status quo of Western values through AI dominance by aggressively buying the early out performers.  There may be more to the market resurgence than just productivity gains thanks to AI. The extension of the post war establishment may also be playing a subliminal part in investors’ insatiable appetite for risk assets. Could Andy Burnham be the next UK PM? If so, what does he stand for? On past statements and positioning, Burnham appears a more left leaning candidate than Starmer. Of course, when and if he gets into No.10, he may well soften his stance and take a more pragmatic line. However, he has in the past suggested a straight 10% lower rate of tax in combination with a higher band at 50%. He’s also criticised Rachel Reeves attempt to cut the spend on the welfare system and has taken a more conciliatory tone to immigration. Sadly demographics do not support this stance. The UK collects £1.23trn in tax contributions and spends nearly £1.4trn on welfare, pensions, defence etc. The resultant £133bn gap is getting bigger as more and more of the boomer group retire but also the welfare state continues to expand.  Over reliance on the debt markets will harm UK growth thanks to higher interest rates required to attract investors. 2 weeks ago we saw the highest coupon offered on 30-year gilts since 1998. A Burnham administration, at least on past statements, appears more profligate than the current team and markets are unlikely to take well to a change of leadership. The Software ETF (IGV) has been on a strong run in the last month. Maybe software is not for the chop thanks to AI. We would suggest continued caution. Listen & watch to see why. Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Dr Copper is showing ‘structural growth’ symptoms

This week we concentrate our attention on copper. Anthropic’s $1.8bn deal with Akamai & Nvidia’s $2.1bn deal with IREN announced last week for further capacity expansion throws a glaring light on the infrastructure requirements required to drive the AI revolution. In 2026 alone AI related data centre capex announcements amount to $650bn, a 32% increase on 2025. New GW growth capacity implied is a 14% increase on 2025. This means that both data centre copper demand as well as grid expansion to accommodate the DC usage will imply an incremental 650k ton demand by 2030 from a current 260k tons. Combined with short term supply constraints, the copper price has spiked 11% in May alone to stand at an increase of 12% in 2026 YTD at $6.49 per lb. We’ll delve into the demand;supply environment for copper and conclude that a major supply deficit is developing which is likely to bolster continued price uplift for the commodity. We’ll also discuss the net beneficiaries at a stock and ETF level and highlight the significant margin opportunity for these companies thanks not only to the improvement in the underlying copper price BUT also the impact of bi-product price appreciation resulting in historically low cash costs of production. We also assess the latest macroeconomic announcements from last week and conclude that our medium-term conclusion of overweight exposure to the US economy at the cost of Europe and UK is backed up by the latest economic releases & Japan’s central bank is set to increase interest rates as early as June 16th implying a potential recovery in the Yen. With stagflation looming in Europe & UK, a Long Yen vs Euro & GBP may be a prudent consideration. Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

META Down BUT not out

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend. Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg This week we parse through Jay Powell’s decision to remain on the Fed rate setting board and the key results from last week.  Alphabet rose (justifiably) by 10% whilst Meta fell 10% (unjustifiably in our opinion) by 10%. Jay Powell becomes one of 8 members of the Fed rate setting committee that are non-aligned with the Trump administration wish to keep reducing rates at almost any cost. The other 4 Trump appointed governors are likely to push through with the dovish agenda.  Question is, how many of the 8 will turn? We think that ceteris paribus, re the economy ie assuming we remain in the current range of activity, the Fed will likely reduce by a further 25-50bps this year. A positive for risk assets. A slew of major results were announced and digested last week. We’ll not dwell on each suffice to say that Alphabet came in as the champ whilst Meta won the wooden spoon in terms of share price reactions. As an ongoing theme, capex continued to rise but companies also highlighted faster data centre growth and capacity uptake as well improved metrics on margin and uptake thanks to the AI capex initiatives. Meta has been perceived of late as a net loser in the AI race. They are spending almost as much on capex as the DC players but with no DC platform and have, what some may call, a lame LAMA LLM (Large Language Model) product.  What the market, we believe is missing, is that Meta probably has the most transparent route to AI monetisation of all the MAG7. Ad revenue targeting is already allowing for a re-acceleration in revenues. According to consensus estimates, revenue is set to rise by 25-30% this year and next. That’s a $130-150bn incremental growth over 2 years. Even at this early stage that’s pretty impressive ROI and payback. In terms of valuation, Meta (according to consensus estimates) is trading on 20x 26 p/e with revenue growth of 25-30%. This is by far the most attractive of the MAG7. Meta has been through investor shunning before and then bounced back. This could well be another such episode. Mastercard & Visa are a backbone to any global portfolio in our opinion. Little in last week’s announcement and guidance has shifted our view. These act as a duopoly in a global payment processing market with EBITDA margins in excess of 65%. There are few if any existential threats to their dominance, at least on the medium term horizon. Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

The Cycle monitor still shows GREEN

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend. Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg This is a big week for markets with over 44% the S&P500 Index in capitalisation terms announcing results. The most significant are Visa, Alphabet, Microsoft, Amazon, Meta, Ely Lilly and Mastercard. Just these companies combined account for 33% of the S&P500 Index. The DOJ have announced that they will drop their charges on current Fed head Jay Powell. No doubt pressure from up top has induced this change of heart to allow for the easy passage to crown Kevin Warsh as the new Fed governor. We’re unlikely to see any movement from the FOMC this Wednesday but clearing the way for a May Warsh appointment brings a resumption in interest declines back to the top of the agenda and hence a re-awakening in risk assets. In the meantime, European inflation numbers out this week are likely to re-enforce stagflationary fears in the Eurozone as this will be combined with Q1 GDP growth, most likely close to zero. The US core CPE is also due this week and likely to be closer to 3.2% vs 3% in Feb and way off the Fed’s 2% target. However, Q1 GDP growth is likely to suggest an annual run-rate of 2.1%. This is at least better than an inflationary/no growth environment we’re witnessing in Europe. On the corporate front, we talk about the dynamics of the last 3 major Top 10 stock concentration eras. The Nifty 50 during the 60’s & 70’s when the top 10 stocks accounted for 30% of the S&P500 Index, the dot com boom in the early 2000’s when the top 10 accounted for 25% of the Index and the current crop of top 10 stocks accounting for 40% of the S&P500 Index.  We discuss the valuation differentials, the earnings growth outlook and the point in the cycle. We conclude that the latest AI driven cycle and the top 10 stocks by capitalisation are still in the ‘early innings’ of the current cycle. We also discuss Intel’s results from last week and how the CPU is the latest chip type to join the AI ‘growth train’. Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Blockading the Blockade

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend. Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg Risk assets are on a tear despite the oil price increasing thanks to the latest development in the Iran war.  President Trump has instigated a blockade on Iran’s existing blockade of the Straights of Hormuz. That’s a lot of blockading! But Why?  Last week’s chat with Anthony Scaramucci (head to Ben’s Market Chat on our YouTube channel to watch the full interview) gave us a sneak peak into the logic. China receives 90% of its oil needs from Iran through the Straight. The US needed to prevent Iran from blockading all shipping bar those heading to China to force China to negotiate with Iran. China is Iran’s paymaster thanks to its oil purchases and as such would have the biggest influence on getting Iran to bend to US’s will. Anthony was spot on on that one. US banks report this week. The US Banks ETF has been in a funk. The worst performance since 2023. However, Goldman’s report yesterday indicated a strong investment banking fee flow. We would also suggest that a potentially steepening yield curve going forward would play into the hands of the sector as this would imply higher Net Interest Margins (NIMs). Whilst the Iran war impact on inflation is likely to be negative, the Fed, under a new head appointed by Trump is still keen to reduce rates, be it later than initially anticipated.  Fixed Income investors will not take well to this as concerns of stagflation re-surface. The Fed controls the narrative at the short end of the yield curve but the long end is firmly in the hands of investors.  Investors may well continue to drive rates higher for 10 year treasuries whilst the Fed aims to put a lid on rates at the 2 year maturity. This means a steepening yield curve implying recession concerns.  Banks generally borrow in the short end and lend on the long. Most mortgages are set at the 10 and 30 year rates. The widening rate horizon improves bank margins but is not great for homebuyers seeking a new mortgage. After this week’s results, expect a potential bounce back in financials. Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.